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Seasonal Demand

By | March 2011
Page 1 of 4
QUESTION 1
a) Seasonal demand can be consumer interest in purchasing particular products only during a specific period within the calendar year. For example, Christmas trees, most fruits, school books and uniforms, TVs, cards and tourism sector among others are subject to seasonal demand. There are certain problems that are associated with this kind of seasonal demand they include;

Over stocking is one of the problems of this kind of demand. Seasonal demand poses problems for businesses because they have to build up stocks for sale during the period of peak demand. Stocks are expensive to keep. Before the world cup electronic shops have to keep large stocks of TVs waiting for the high sale period. This is the same thing with bookshops that have to stock up awaiting the January sale season.

Relatedly, firms are also caught with too many stocks if peak demand sales fail to live up to expectation, but sales are lost if peak demand exceeds expectations. Failure of reaching the expected sales can lead to high losses especially for perishable goods. For example flower shops had large stocks of flowers anticipating the high sales during the valentine period counted losses if they didn’t sell all their stocks.

Seasonal unemployment also arises from this kind of demand. Due to low sales during the low season the organizations are forced to lay off some of the employees they had during the boom period. For example hotels that have very high number of customers during the December period lack customers during the off-peak period are forced to lay off some of their staff during this periods.

Hoarding can also arise in this kind of demand. This means some of the sellers or producers can hide their products because they anticipate high demand. For example the petrol stations that hide the petroleum products before charismas because they know people are travelling.

To the consumers high prices may be associated with seasonal demand. The sellers or producers...

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